The Winyard court also held that because the petitioners in
that case, like Senape, were terminated prior to the adoption
of Part 504.5(e)(1) in June of 1988, they were entitled to the
"hearing provided for in § 504.7(b)." Winyard, slip op. at 14.
That conclusion, however, was predicated on the erroneous
assumption that DSS intended Part 504.7(b) to be a substantive
provision granting the right to an appeal, rather than a mere
cross-reference to Part 515.
Plaintiff further argues that because DSS listed in its
letter of March 15 concerns that would have constituted "cause"
under Part 515, this established that DSS was actually
proceeding under the sanction provisions of that Part. Part
515, however, is not the only provision in the regulations that
refers to the misconduct of the type that Senape is alleged to
have committed. Part 504.5 also includes several provisions
that would correspond to the deficiencies listed in DSS's
letter of March 15. For example, that part allows DSS to
consider, in determining whether to accept an initial enrollee
or re-enrollee in the program, "any prior pattern or practices
in furnishing medical care," id. Part 504.5(a)(12), and "any
other factor having a direct bearing on the applicant's ability
to provide high-quality medical care." Id. Part 504.5(a)(13).
Assuming, arguendo, that the intent of DSS were determinative,
the mere fact that Senape's termination letter listed several
deficiencies that could be considered "unacceptable practices"
under Part 515 does not mean that DSS intended to sanction
Senape under that Part. The provisions of Part 504.5 are
Plaintiff argues, nonetheless, that because DSS listed these
concerns in the March 15 letter, it should be deemed to have
proceeded under Part 515. Although he does not clearly explain
why this should be the case, the thrust of his argument is that
there is a certain stigma associated with a government agency's
determination that a physician is not competent to deliver
adequate medical care or is not capable of complying with the
rules and regulations associated with the Medicaid program. He
argues that, by noting such concerns in connection with a
denial of re-enrollment, DSS creates the same climate for
harmful repercussions that would exist if it had terminated the
provider's participation for cause under Part 515.
The alleged stigmatizing nature of the March 15 letter forms
the basis of Senape's "liberty-interest" claim. As noted below,
Senape's concerns in that regard are speculative. Nevertheless,
even if the court were to accept that Senape had already
experienced some repercussions from DSS's expressed concerns
about the quality of his medical care, this would not be
determinative of the due process issue. First, it is more
stigmatizing to a provider to be sanctioned under Part 515 than
under Part 504. A provider generally cannot re-apply to the
program for at least two years if terminated pursuant to Part
515, but can re-apply immediately if terminated pursuant to
Part 504. Tapp Aff. ¶¶ 32, 34. Further, if the provider is
terminated pursuant to Part 515, the department must report
this fact to other interested state agencies and the federal
government — which may disqualify the provider from
participation in the Medicare program. Id. ¶ 34. DSS has stated
that there is no such reporting requirement when it declines to
re-enroll a provider under Part 504.5. See id.
Second, the possible stigma resulting from termination is
only one of the rational bases for DSS to grant an evidentiary
hearing in some cases while denying it in others. Other
factors, such as the interruption of continuing participation,
are also important. Indeed, the regulations allow DSS to deny
an initial application if it decides that the physician is not
able to "provide high-quality medical care." See 18 N.Y.CRR Part
504.5(13). An applicant denied enrollment under such
circumstances would not be entitled to an evidentiary hearing
to contest the "stigmatizing" finding of DSS. See id. Part
519.4(b). Under plaintiff's argument, however, if DSS were to
mention such a concern as a reason for denying an application
for initial enrollment, the applicant would be entitled to the
full panoply of rights available to currently enrolled
providers sanctioned under Part 515.
Granted, to an ousted physician, there may be little
practical difference in whether he or she has been terminated
for cause under Part 515 or simply not re-enrolled under Part
504. In both cases, the physician is no longer in the program.
That fact alone, however, does not control whether an
evidentiary hearing is required when DSS declines to re-enroll
a provider. The regulations on their face do not provide an
evidentiary hearing in such circumstances and the department
does not interpret them in the manner plaintiff urges.
Therefore, if plaintiff's argument is correct, it would be
because of a statutory policy or constitutional doctrine that
compelled DSS to treat the two situations as one and the same.
C. The Enabling Statute
Senape claims that the relevant enabling statute for these
regulations allows DSS to terminate a provider only for cause,
which would require the department to provide an evidentiary
hearing in each case, see Plaza Health Laboratories, Inc. v.
Perales, 878 F.2d 577, 581 (2d Cir. 1989). Plaintiff's argument
is belied by an examination of the statute itself. New York
Social Services Law Part 364 confers on DSS, in conjunction
with the State Department of Health, the authority to establish
regulations "including but not limited to procedural standards
relating to the revocation, suspension, limitation or annulment
of qualification for participation as a provider of care and
services," for incompetency, failure to meet program standards,
or threat to public health or safety. N.Y. Social Services Law
§ 364(2)(b) (McKinney 1983) (emphasis added).
Although the Legislature specifically directed the department
to develop standards relating to termination for cause, the
emphasized language undeniably confers the authority to
promulgate any regulations reasonably necessary to further the
objective of maintaining standards for the delivery of proper
health care and services. Therefore, DSS has the authority to
adopt any regulation that is not arbitrary, capricious, or
manifestly contrary to statute. See Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104
S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984).
Widespread Medicaid fraud is a major problem in the health
care industry, costing the federal and state governments over
forty-five million dollars annually. Bucy, Fraud by Fright:
White Collar Crime by Health Care Providers?, 67 N.C.L. Rev.
855, 856 n. 7 (1989). In an effort to combat this problem in
New York, as well as to ensure the competency of the
physician-providers, DSS implemented the periodic re-enrollment
scheme set forth in Part 504. See Tapp Aff. ¶¶ 52 & 53. The
type of hearing sought by Senape might reduce the possibility
of an unjustified denial of re-enrollment, but granting such
relief to even a small proportion of the 58,000 Medicaid
providers in the State of New York, see Karanja v. Perales,
142 Misc.2d 109, 111 n. 1, 535 N.Y.S.2d 892, 894 n. 1 (Sup.Ct.
1988), would impose an onerous burden on the department. See
Tapp Aff. ¶ 31. The periodic re-enrollment scheme, with its
limited right of review, is a valid means with which to balance
the state's interests with those of the provider. In addition,
as noted earlier, a re-enrollee has a lower expectation of
continued participation and is less stigmatized than a provider
terminated under Part 515, providing a rational basis upon
which to draw a distinction in whether to grant hearings.
Therefore, the regulations cannot appropriately be
characterized as arbitrary or capricious. See Chevron, 467 U.S.
at 844, 104 S.Ct. at 2782.
D. Due Process Right to a Hearing
Plaintiff argues that the regulations, taken as a whole,
create a constitutionally protected due process expectation in
a provider's continued participation in the Medicaid program,
which cannot be terminated without an evidentiary hearing,
see Goldberg v. Kelly,